Many small business owners have their hands full with tax-related paperwork. If you’re one of them, the admin probably ranks low on the list of your favourite things to do, says Yolandi Esterhuizen, registered tax practitioner and director at Sage Africa & Middle East. However, filing accurate tax returns and meeting SARS deadlines is one of the most important responsibilities you face.
The interest and penalties payable on late or inaccurate VAT, PAYE or company income tax returns can be harsh. That means it is in every small business’s interests to prepare the relevant submissions on time and to ensure they are accurate.
Here are three ways to get it right:
Consult the professionals
Unless you’re an accountant, it’s wise to seek help from a professional to understand your tax obligations. You, or your accountant, will use the annual ITR14 declaration on the SARS eFiling system to set out your income and expenses. Your declared profit or loss for the year will determine how much tax you will need to pay, or if you will get a refund from SARS.
Some limited liability companies are required to be audited.
If you run a sole proprietor or partnership business, it will not be registered with the CIPC. You will submit a form called the ITR12 each year, and provisional tax submissions twice per year. You can do this yourself without needing to appoint an accountant.
However, a registered tax practitioner can help ensure you comply with SARS regulations and offer advice about how to reduce your tax bill by making full use of the tax deductions to which you’re entitled.
Look for a firm or professional registered with a professional body such as the South African Institute of Professional Accountants (SAIPA) or the South African Institute of Tax Practitioners (SAIT). Your tax practitioner should also be registered with SARS. Look for someone with good references who has an established base of small business customers.
Automate processes and keep electronic records
Many small business owners still use Excel spreadsheets and a shoebox full of bank statements, bills and receipts to track their assets, liabilities, inventory, expenses and payments. This approach is time-consuming and prone to error, and it also means you may end up paying an accountant more to capture and reconcile your transactions in a proper accounting system.
You can save time and frustration for yourself and your accountant by capturing every transaction in an electronic accounting system as it takes place.
A good accounting system will make it easy for you to send invoices, track outstanding payments, and monitor expenses, and today’s cloud-based solutions are easy to use and priced on an affordable subscription. An accounting and payroll solution developed for the local market will automate your payroll tax (EMP501 and EMP201) and VAT201 returns for easy submission.
Know the deadlines
You need to meet some important deadlines each financial and tax year.
- You must file a compulsory provisional tax return six months from the start of the financial year and another at the end of the financial year.
- You may make a voluntary submission and top-up payment six months after year-end.
- You must file your annual return within one year of the end of your financial year.
Provisional taxpayers (e.g. sole proprietors)
- You must file one provisional return and make one tax payment by end-August.
- A second provisional payment is due by the end of February (end of tax season).
- You may make an optional third payment within six months of the year of assessment if the amount paid in previous payments was insufficient.
- Tax filing season for provisional taxpayers usually begins in early June with a deadline of 31 January.
- Submit the monthly EMP201 by the seventh of the following month or the Friday before if the seventh falls on a weekend or public holiday.
- File the interim EMP501 reconciliations (1 March to 31 August) between 1 September and 31 October.
- File the annual EMP501 reconciliations (1 March to 28/29 February) between 1 April and 31 May.
- Manual submissions of the VAT201 payment must be complete by the 25th of the month (or the Friday if the 25th falls on a weekend or public holiday).
- Electronic submissions and payment (via either SARS eFiling or Electronic Funds Transfers) of the VAT201 must be done by the last business day of the month.